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NXP to Buy Marvell Wi-Fi Tech Unit in $1.76 Billion Deal

Natalia Drozdiak and Ian King
NXP to Buy Marvell Wi-Fi Tech Unit in $1.76 Billion Deal

(Bloomberg) -- NXP Semiconductors NV agreed to buy the Wi-Fi connectivity business of Marvell Technology Group Ltd. in a deal valued at $1.76 billion.

The all-cash acquisition includes Marvell’s Wi-Fi and Bluetooth technology and related assets, and will allow the automotive industry’s biggest chip supplier to offer customers a broader range of options to connect devices to the internet.

The Marvell unit generated about $300 million in revenue in 2019, and Netherlands-based NXP said it expects to double that by 2022. The deal should close by the first quarter of 2020, the companies said.

"We think it’s another important foundation in our total solutions for customers: having the connectivity to go with the processing and security," NXP Chief Executive Officer Rick Clemmer said in an interview.

Marvell’s unit is more valuable to NXP because customers have been urging Clemmer to add connectivity to his current products, the CEO said. NXP had been trying to develop the short-range connection chips itself, but decided acquiring the capability would be quicker.

For Santa Clara, California-based Marvell, the deal should result in enhanced margins after closing, the company said in a statement Wednesday. “This transaction yields a premium valuation and substantially higher economic return for Marvell shareholders,” it said.

Analysts generally reacted positively to the deal. Bloomberg Intelligence analyst Anand Srinivasan said the purchase was "pricey" but "sound," as it enhances NXP’s market share.

“The deal is beneficial for both parties,” analysts at Piper Jaffray wrote. Marvell’s connectivity assets “did not completely fit with the new company’s strategic direction” and NXP “had been underinvesting in Wi-Fi for the last few years.”

NXP’s acquisition of Marvell’s Wi-Fi assets comes as countries around the world prepare for the rollout of ultra-fast 5G wireless networks, which will power everything from self-driving cars to smart factories. Clemmer said he believed Wi-Fi would remain the primary method for connecting industrial applications and the internet of things in the near-term, however.

"For the next four to five years, we think low-powered Wi-Fi will be much more significant in driving solutions for customers than 5G," he said.

NXP has been investing in technology used in the automobile industry, and alongside fellow tech companies and carmakers has been lobbying for Wi-Fi technology to be adopted as the industry standard in how cars talk to each other.

The purchase won’t dent NXP’s ability to continue to provide cash returns to investors even though NXP paid “full price” for the Marvell unit because there was competition, Clemmer said. “It’s not something we bought on the cheap,” he said.

NXP shares fell less than 1% at 1:25 p.m. in New York. They are up 22% this year. Marvell shares rallied 3%, bringing gains this year to 36%.

The deal is also NXP’s first since the $44 billion takeover by Qualcomm Inc. collapsed last year. Qualcomm scrapped its proposed bid in July after an almost two-year wait for approval, as tensions between the U.S. and China escalated. Chinese regulators declined to clear the deal, though the country later expressed regret over the transaction’s collapse.

Marvell has been busy with acquisitions of its own. Last week it announced it will acquire the Avera Semiconductor chip-design unit from Globalfoundries Inc. for $650 million in cash, adding the ability to produce more specialized semiconductors needed for 5G phone networks and cloud-data centers.

(Updates with comments from NXP CEO.)

To contact the reporters on this story: Natalia Drozdiak in Brussels at ndrozdiak1@bloomberg.net;Ian King in San Francisco at ianking@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Molly Schuetz, Giles Turner

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